For the third straight week, mortgage rates rose, adding fuel to ongoing market uncertainty that has largely brought the US real estate industry to a near standstill. The latest increase, which brought rates to their highest level in the last month, had an immediate impact on mortgage applications, driving them down by 5.2% compared to October 2025.

Some analysts point to the fact that the fourth quarter is generally the slowest in the real estate industry, underscoring the belief that the latest rate hikes probably won’t have much of an impact. Meanwhile, other industry experts are focused on the fact that rates remain high and push higher, which could lead to increased uncertainty heading into the beginning of next year. Whether you’re considering buying a new home or refinancing your current mortgage, you need to know what’s happening with mortgage rates. Today, take a deeper dive into what the housing affordability crisis could mean for you.

Why Do Mortgage Rates Keep Increasing?

While anyone can monitor the seemingly constant increase in mortgage rates, not everyone understands what’s driving rates upward. Mortgage rates do not rise in isolation. Instead, they respond to broader financial markets, including where yields set on Treasury securities create the baseline for long-term borrowing costs. When investors demand higher yields on government bonds, lenders generally pass that increase on to borrowers in the form of increased mortgage rates.

Over the last few weeks, which have seen consistent increases, bond yields ticked up as investors digested a mix of stronger hiring figures and inflation readings that suggested the economy wasn’t cooling as quickly as some hoped. Those pieces of data prompted the market to price in longer windows of higher policy rates, and mortgage rates followed the trend.

Treasury yields aren’t the only factor that is driving rates upward. Lender costs, secondary market demand for mortgage-backed securities, and seasonal factors are also responsible. This combination of factors is why potential homebuyers need to constantly monitor the headlines and their own loan estimates.

How Increased Rates Impact Loan Demand

While many of the factors that lower loan demand take some time to come to fruition, increased rates have an immediate effect. Since they reduce buying power, higher rates mean that a borrower can buy less house when rates rise. Conversely, buying the same house costs more, which is why so many potential buyers have been sitting on the sidelines for the last few years.

First-time buyers and households who are already feeling financial strain are the most impacted by these rates, since many are already on the verge of qualification. When rates continue to increase like they are right now, potential buyers take a step back, which results in less competition in the market, driving asking prices even higher.

However, homebuyers aren’t the only ones who face a squeeze when rates soar. Homeowners who want to refinance their homes are also affected by higher mortgage rates. Unlike new mortgages, refinancing applications are more sensitive to short-term moves in rates. Over the last week, those applications dropped by 7%. However, there is still some hope. When compared to the same week a year ago, refinancing applications are up by a whopping 125%. However, that increase has more to do with the small number of applications that were filed last year, meaning the refinancing market is still far from stable.

The Short-Term Impact on the Housing Market

A sustained period of high mortgage rates usually slows down transactions. When there aren’t as many buyers actively shopping for homes, prices have to respond. In some markets, sellers take their homes off the market, which leads to a dip in inventory. However, that’s not the only possible outcome. In other instances, buyers change their tactics. This can include offering less, negotiating concessions, and targeting different neighborhoods where prices are lower. Over time, those decisions, which may seem small on the surface, impact local markets more than national headlines do.

It's important to understand that higher mortgage rates aren’t a guaranteed deal-breaker in every market. In areas where supply is constrained, such as coastal cities and suburbs with low inventory, the lower number of listings can result in qualified buyers making offers, regardless of mortgage rates. However, the key variable is how many marginal buyers exit the market and whether sellers react by lowering price expectations or remaining patient.

Higher mortgage rates can also slow the housing turnover rate, which is a key metric when determining how stable the market is. Homeowners who have low-rate mortgages that were locked in a few years ago may be reluctant to sell and take on a higher-rate mortgage. This reduces the available inventory, which not only slows transactions but also impacts the economy as a whole. Known as a “rate lock,” this issue leads to inventories staying small, even when demand slows.

How Buyers Can Navigate Higher Rates

Homebuyers trying to navigate these higher rates have some options. Since knowledge is power, they should start by re-running their affordability calculations and expanding search parameters. If a potential buyer is shopping for a new home because they have to move, being willing to compromise on some amenities can be crucial. A small rate increase can often be offset by looking in adjacent neighborhoods or considering different property types that offer better value relative to monthly payments. Flexibility on timing and location can translate directly to lower costs.

It’s also important to focus on the hidden costs of homeownership to make sure that you’re seeing the bigger picture. Be sure to consider things like insurance, maintenance, and any HOA fees to ensure that you’re not spending more than you can afford.

Where Rates Go From Here

If there’s anything that we’ve learned about the US housing market in the last few years, it’s that things can change quickly. The record-low rates from the pandemic era seemed to change in an instant, resulting in the high rates that we see today. Predicting what rates will do next is virtually impossible, which is why it’s so important to work closely with a lender who can help guide you through the uncertainty. Even if buying a home isn’t realistic for you right now, you can continue to monitor the market so you can act responsibly and quickly when the time comes.